SEOUL (Reuters) - A board member of South Korea's central bank said on Friday the nation's potential annual growth rate will stay below 3 percent due to a shrinking workforce and the high-level of household debt among the elderly.

In a lecture to university students in Seoul, Bank of Korea board member Cho Dong-chul said the South Korean economy is walking a similar path to that of Japan in terms of demographic changes and nominal growth rate.

"There is about a 20-year gap, but looking at population structure and nominal growth rate, South Korea is experiencing a similar situation with that of Japan," Cho said, according to a speech text released by the Bank of Korea.

Cho also said South Korea's economy won't be able to sustain an annual growth rate of 3 percent for the foreseeable future as recovery in private consumption remains weak.

To resolve structural problems in the economy such as low labor market productivity, Cho urged the government to undertake reforms to remove 'zombie companies' and reduce employee protections for the regular workers.

South Korea's economy grew 2.8 percent in 2016, and the Bank of Korea expects growth of 2.6 percent this year.